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A Cost-Benefit Analysis of Changing to a TMR Feeding System


Michael F. Hutjens

Department of Animal Sciences, University of Illinois,
232 Animal Sciences Lab,
1207 West Gregory Drive,
Urbana, IL, U.S.A. 61801
E-mail: hutjensm@idea.ag.uiuc.edu


Take Home Messages
Adding TMR technology to existing facilities can return $46 per cow per year and pay off the entire investment in three years depending on herd size, milk increase, and initial investment based on a Wisconsin model with US inputs.
A Missouri model indicated that a herd size of 100 cows or larger is needed to economically justify a new TMR system including feed storage and handling.
Excellent success with TMR occurs if lead factors, commodity feeding, optimum grouping strategies, topdressing in tie stall barns, and bunk management occurs.

Introduction


Total mixed rations (TMR) continue to expand in use on dairy farms. A 1993 Hoard's Dairy survey reported that 29.2% of surveyed U.S. dairy farms had adapted this system of feeding dairy cows. A 1991 Illinois dairy survey found 26% of Illinois dairy farmers utilized TMR rations with 300 kg more milk per cow compared to other feeding systems. Total mixed ration applications should not be limited to freestall or loose housing systems. Conventional or tie stall barns can also make successful use of TMR systems. This paper will consider the economics and management considerations involved in changing to a TMR system. Two different models will be evaluated.

Model One: Shifting to TMR with Existing Facilities


Wisconsin researchers developed a computer model to evaluate profitability and cost recovery when shifting to a TMR system. Two general costs were considered: variable and fixed. Fixed costs do not vary after the initial investment is made and will be larger for smaller herd sizes. Variable costs depend on investment intensity and inputs impacted by cow numbers and purchased inputs. The following variables were used in the Wisconsin model.

Milk production level when TMR was added. Higher milk yield reflects high management ability and improves the anticipated positive response.
Number of cows in the herd. Larger herd sizes allow fixed costs to be spread across more production units and labor inputs are reduced.
Milk price.
Purchased feed cost.
Expected change in production. Milk increases vary from 1 to 3 kg per cow depending on management abilities, potential milk not being harvested (parlor grain feeding for example), and opportunity to improve nutrient intake (dry matter and/or nutrient content).
Change in milk price. Milk components can increase due to improved rumen digestion, especially if slug feeding of grain occurred or nutrient needs were not being met.
Investment required. The cost of the TMR mixer, conveyers and related equipment, feed room renovation, and feed storage contribute to fixed costs which were sensitive to herd size. Capital charge was set at 20% based on a seven year loan and 12% interest, 4 % repairs, 0.5% for insurance, and 0.5% for taxes.
Consulting costs. Professional ration consulting fees of $2 per cow per month and feed testing (3 samples per month at $9 per sample) were included.
Labor costs. Additional mixing and weighing time usually occur. Automation can reduce this cost. In the model, one hour of extra labor was charged at $6.
Cooling, hauling, and other miscellaneous costs. The targeted value was 2.2 per kg of milk.
Feed costs decrease (if bulk quantities can be purchased) or increase (if lead factors are too high, one group feeding, or milk response does not occur).
Feed savings. Forage and grain savings occur because of less feed wastage, bulk purchases, and use of cheaper feed ingredients. In the model, three percent of grain and forage dry matter was programmed.

Based on these variables, a partial budget was calculated in Table 1. Profit was $18.04 per cow based on 554 kg more milk and an increase of 0.1 milk fat point. Table 2 lists the profit potential (ranges from $34 to +$64 per cow per year) based on various feed costs and milk production responses. New York researchers measured a 1.3 kg milk response when herd shifted from parlor feeding to TMR systems. Increasing herd size from 60 to 80 cows (keeping all other variables constant) increased profits $18 per cow per year.

Another consideration was the pay back capacity of TMR technology. The model considers debt serve (principal and interest) using available cash. Two factors included in the calculation were the length of time to achieve expected production gain (12 months) and length of time to achieve reduced feed costs (24 months). Data in Table 3 indicate the number of months required to repay the costs of setting up a TMR system over a range in feed costs and production responses. These data indicate that the economic viability of an investment in a TMR system is dependent on achieving a milk production response to TMR.

Model Two: Adding TMR to a New Freestall Operation
Missouri workers developed a budget plan for a new TMR system in freestall operations with new storage, mixing, and delivery of the TMR. Variables are outlined below with two herd sizes (100 and 300 cows).

Silage storage included two bunker silos for corn silage and hay silage ($26,500 for 100 cows) and $52,000 for 300 cows. Hay storage was priced at $16,000 (100 cows) and $34,500 (300 cows).
Grain storage was charged at $5000 (100 cows) and $26,000 (300 cows). Commodity storage (4 bays) was listed at $16,000.
Equipment charges included mixer wagon with scales at $7,200 (100 cow) or $8,100 (300 cow), roller mill ($3,500), and front end loader ($3,900).
Three levels of increased milk production were evaluated for cows producing 8181 kg of milk annually (5% or 409 kg, 8% or 636 kg, and 10% or 818 kg).
Milk fat test can increase 0.1 percentage point due to improved rumen environment and digestion.
Three percent lower feed cost was credited because of reduced feed wastage.

Table 4 lists marginal costs and returns for 100 and 300 cow units at three different levels of milk production. Several conclusions can be drawn from the results.

Herd size of 100 cows was marginal in net return unless milk yield increases significantly.
Milk increases improved net return per cow ($75 per cow from 5 to 10% milk increase).
Larger herd sizes increased the net return per cow ($55 more per cow from 100 to 300 cows).

Smaller herd sizes should not discount TMR systems because significant cost reductions can occur (eliminate hay storage, purchase of used equipment, or use of existing equipment). New York workers listed several other economic factors not included in either model. Veterinary cost declined 10% with TMR due to less acidosis, ketosis, and nutritional stress.

Milk parlor efficiencies lowered milking time by 30 minutes because cows were grouped by level of milk production with more uniform milking times. Less palatable feeds can be used which may be more economical or effective (animal by-products, fat products, or additives).

Management Guidelines

Once a producer has determined that TMR is an economically sound choice, the following points can be considered.

A mobile mixer provides maximum flexibility for future use and transportation of diets to various groups including heifers, dry cows, and dairy beef.
Lead factors (milk production level to balance the ration) are 30% for one group (for example, a 30 kg milk tank average would be 39 kg), 20% for two groups, and 10% for three groups.
Grouping strategies must include far off dry cows, close up dry cows, first lactation cows, and high cows. Additional grouping options include high cows/low cows, high producers/fat cows, high open cows/high pregnant cow/low cows, and fresh cow group. Nutrient guidelines for groups are listed in Table 5.
In conventional barns, the basic TMR (balanced at milk cow tank average with a lead factor) can be fed and topdressed with bypass protein, fat, and additives for higher producers. Baled hay can be fed as a topdressed forage if hay intake can be controlled and limited to 2 to 3 kg per day (ideally fed twice a day). Under-feeding TMR limits the amount of TMR to lower producing cows with additional forage fed free choice.
Baled hay is not needed if adequate functional fiber is provided from silage and by-product feeds. High quality hay is needed for proper mixing and sheering in mixers with hay processing capability and to avoid sorting by cows.
Four commodity bays are recommended: protein supplement, fibrous grain source (beet pulp, corn gluten feed, mill feed, or soy hulls), grain energy source (barley or corn), and fat source (soybeans, canola seed, or fuzzy cottonseed). Minerals could also be a bulk commodity, but more producers use bagged supplements. A commercial feed company or cooperative could blend a complete mineral/protein/fat product in bulk and store in a bay.
Total mixed ration mixers must not be allowed to overmix because of wear, power needs, and reduced feed particle size.
Total mixed rations should be routinely tested (DM, CP, and ADF) to evaluate mixing and changes in feed ingredients. If possible, reverse the feeding direction of the TMR mixer in case uniform mixing does not occur due to ingredients or mixing order.
Weigh backs should be measured with 2 to 4% excess TMR fed (avoids empty bunk syndrome). Testing the weigh back can be useful to evaluate if the remaining feed is true TMR, not unpalatable and sorted residue (also defined as an empty bunk).

References
1. Coppock, C. 1977. J. Dairy Sci. 60:1327.
2. Fischer, D. 1993. IL Dairy Report. p. 8.
3. Frank, Gary G. 1992. Univ. of WI TMR Handbook. pp. 1-12.
4. Hoard's Dairyman Market Survey. 1993. Hoard's Dairyman bulletin.
5. Hutjens, M.F. 1994. East. Can. Nut. Conf. Proc. pp. 101.
6. Shaver, R. 1993. TMR Handbook. Univ of WI Ext. Publication.
7. Spain, J., M. Bennett, D. Williams and D. Osburn. 1991. University of Missouri, Missouri Agricultural Experiment Station bulletin MP 662.

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